Real estate experts say the numbers indicate that
demand for housing is pushing buyers into western
Massachusetts where prices are still relatively
affordable.

Franklin, Hampden and Hampshire Counties recorded the largest median increase in condo prices in 2005.

Franklin County condo prices spiked almost 29 percent.

Hampden County condo prices shot up by almost 20 percent.

Hampshire County recorded an increase of just over 18 percent for condos.

Price jumps of at least ten percent for single family homes were also seen in those three counties.

Housing prices in Western Mass are surprisingly affordable compared to Boston and NYC standards. The trend from urban to suburban is a common phenomenon as city prices rose sooner than their rural counterparts.

In January 2006 the new edition of USPAP will be available and distributed, though its changes will not become effective until June. The Appraisal Standards Board

recognizes that the marketplace will need time to adjust
to the changes and this five-month period between
publication and the effective date should allow for that.

2006 USPAP has some radical changes that will impact the appraisal business in 2006. Taken from the November 2005 newsletter of the Appraisal Foundation,

the Departure Rule has been removed and the new
Scope of Work Rule has been added. The terms
Limited Appraisal, Complete Appraisal, Binding
Requirement and Specific Requirement have also
been removed from USPAP.

I am not sorry to see these terms go.

After 10 years, there is still widespread confusion amongst appraisers as to what they mean. One major lending client routinely asks for limited appraisals, when they want a brief (i.e., cheap) report. Another asks for a summary appraisal but cautions that it must be “complete enough so that we can understand everything that you did”. (In this case, summary also means cheap.”) And, frankly, I’m still not sure what a Specific Requirement is.

Although abused, these terms at least serve as a benchmark for discussions. Going forward, the onus will be on the buyers of appraisal services to clearly spell out the scope of services that they require under the new USPAP, something that can be quite difficult with the impersonal on-line bidding systems that continue to gain in popularity. That is certainly wishful thinking of course, and my guess is that five months will barely scratch the surface in incorporating these changes into daily practice.

The days of being surprised about residential pricing are basically over. The 1-bedroom mentioned in the Daily News article was an 1,155 square foot 1-bedroom with direct views of Central Park at $3,900 per square foot. $2M for a 1-bedroom without views. Since there are no true comparables for this project, pricing must have been extremely difficult.

To those new to the Manhattan market, $3,900 is not an overall price per square foot record. However, it probably is a record specifically for a 1-bedroom unit (I haven’t verified).

The Gothamist post’s title is pretty strong language and to many, the price really is ridiculous. However, since there has been a rush to purchase small units at the Plaza, it suggests that there is demand at this price point.

You can scratch your head and be resolute in the fact that one sale like this 1-bedroom is an anomaly, but many sales like this is a market.

Investor optimism surged in December nearly
matching its February high for the year. This strong
positive reaction to the sharp drop in gas prices at
the pump during recent months is all the more
impressive given the continued uncertainty among
investors concerning the future volatility of energy
prices over the next year.

As a result, many investors could be surprised by a potential slowdown. Whats amazing about this poll, is only 86% of all investors surveyed have ever heard of a so-called “housing bubble.”

Of those 86% half give it a few more months, 38% say its about over and 8% say its over now.

77% of investors expect housing prices to remain the same or continue increasing over the next year and 21% expect a modest decline. Only 1% expect a rapid price decline.

Seasonal pattern – “Investor optimism surged 29 points in December and now stands at 79 — its highest level since February when it reached 82. This is the fifth straight year investor optimism has increased between November and December.”

If housing does slow down, “a Merrill Lynch & Co. report in August 2005 asserts that the real estate boom has accounted for about half of the economic growth and jobs created over the past five years. While such estimates are extremely difficult to substantiate, this assertion appears to have considerable face-validity. The traditional ripple effects of a strong housing market have been magnified in recent years as many consumers have liquefied their housing wealth gains by way of home equity loans and lines. This is one reason consumers have been able to maintain their spending throughout periods of economic adversity during the past five years.”

Gallup concludes that investors could be right and the slowdown in the number of units sold may not weaken housing prices but that would be inconsistent with historical trends.

Government officials “are scrambling to provide
“workforce housing” — price-controlled homes for
families with high five- and even six-figure incomes.”

While urban areas like New York have long provided housing assistance for low and middle income residents, areas like Washington, D.C. have focused on low income. As a result, there are a lot of residents simply priced out of the current boom.

“There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. “There’s a systematic erosion of affordability,” says David Seiders, chief economist of the National Association of Home Builders. That decline is “the main reason … the market is starting to cool.””

Comments Off on In Search Of Affordable Housing, Many Are Moving Away From The Coasts

The real estate blogs that are springing up daily have provided the delivery of content in real time, causing many in big media to consider launching their own blogs to keep pace. One of the first Big Media real estate specific blogs was the recent launch of The Walk-through by the New York Times.

The perception by many is that small blogs are independent and a more pure source of news while Big Media is subject to influence from advertising.

Have you looked at the titles of some of real estate blogs lately?

It seems like more than half use the word “bubble” in their title. That seems akin to using “crash” that describes one side of the housing picture. Wait a sec, here is one that uses both of these words. Southern California Real Estate Bubble Crash. Conversely, there are virtually no blogs with titles that say something like “There is no bubble” or “Anti-bubble.” This certainly suggests widespread questions about the real estate market.

The word “bubble” seems to strike an emotional cord with many. Its a very effective way to steer traffic to a blog since the word bubble grabs a lot of eyeballs from Google searches. With all the talent that goes into many of these blogs, I just wonder if this stratgy isn’t too short sighted.

Imagine for a minute that the real estate market does not see the effects of a bubble over the next few years. Such a title will seem strangely out of place. If the market does see the effects of a housing bubble over the next few years, it would still seem like a relatively obsolete title after the bursting of such a bubble.

I don’t mean to get hung up on this point, and it is a relevantly minor point, but since there are so many real estate blogs named “bubble” there must be more to this issue. Here are some of my favorite real estate blogs that have “bubble” in their title.

Inflation, not speculation, can explain most of the
gains in Colorado home prices the past decade,
Thibodeau says.

“Colorado last enjoyed double-digit gains in sale prices of existing homes in 2000 and 2001. Since then, the state has lagged the rest of the country when it comes to real estate appreciation.”

Prices are rising because of rising construction costs and investors are putting more of their net worth into real estate, including 2nd homes and investment properties. More single people are buying homes and job creation is forecast to increase next year.

_However…_
The postion here seems contradictory to facts simply because the argument of an increase in 2nd home and investment properties contains an element of speculation. In addition, Colorado home purchasers are heavy users of interest only mortgages, foreclosures are rising and payrolls are lower than they were in 2001.

In other words, this professor has not provided any arguments to refute existing issues other than the forecast for job creation. This is the typical momentum argument we see quite often, light on facts, heavy on confidence.

found that specialists are not significantly more reliable than non-specialists in
guessing what is going to happen in the region they study.

Tetlock’s book is all about supporting this claim.

This has particular relevance for those of us who make our living appraising property because, as we all know, it is the expectation of future benefits that is one of the primary determinants of property values (remember the principle of anticipation?).

We have been especially busy this past year appraising new condo projects throughout the city, analyses which require some sort of judgment about where pricing will be when the project comes in line, usually 12 to 18 months down the road. At the end of the day, none of us really know where prices will be at that time (though I like to think that we have a pretty good idea!). The important thing though, is not what we experts thinkbut what the buyers think.

It’s easy to forget that this is our real jobnot predicting the market, but reporting the actions of the buyers.

Comments Off on Appraising: The Difference Between Reporting And Predicting

Warning: Use of sarcasm may go undetected if this post is not read carefully.

The use of the the words gifts eggnog reached parity with housing bubble in blog posts in early December seeing significant gains over the past three days. This unique insight into the relationship between the housing market and the holidays was made possible by BlogPulse.

I have always found it interesting that many real estate professionals define market value as the price someone is willing to pay for a property. However this assumption can often be far from reality and is why real estate brokers and real estate appraisers can be at odds on some transactions.

The real estate broker’s job is to get the highest price for the listing they represent, while the real estate appraiser (abridged version) has the responsibility of estimating the reasonable value that a fully informed buyer and a fully informed seller would likely agree on.

What happens when the seller is located on a parcel of land that is of key importance to a larger adjacent development? Thats where reality leaves the picture.

The property was a key parcel in a larger development plan and the seller was willing to pay significantly more for the property. A typical mortgage lender would never provide financing on this house for this value because the price paid reflects the investment value to the buyer, not market value to the typical buyer.

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About Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.Learn More...

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